An Econometric Model of the Tobacco Industry

Abstract:

N thi's paper we describe an econometric
model of the American tobacco industry for
the period 1949 through 1966. The model contains
19 equations and is divided into three major
blocks - (1) leaf production, (2) leaf
price, and (3) cigarettes.
The objective is to explain the behavior of
the tobacco industry over an 18-year period.
Ultimately, we hope to use the model to perform
policy simulation experiments to evaluate the
effects of alternative governmental and managerial
policies on the behavior of the industry.
We begin with a brief description of the
industry. Next we discuss the theoretical specification
of the model and the statistically estimated
equations. We conclude with some
example simulation results which provide additional
evidence of the validity of the model for
explaining the behavior of the tobacco industry
over the period 1949 through 1966